The Proposal of Tax on E-Cigarettes

As sure as night follows day, governments tend to follow money. Take any industry you can think of, and just look at how government reacts to it. If that industry can be at all profitable, then you can wager almost any amount of money that eventually some group of political leaders is going to start taxing its products and services. This has been particularly noteworthy in the case of tobacco products, which have for some time been subjected not only to ordinary sales tax, but to targeted taxes that were created just for that industry. Now, those politicians have trained their sights on electronic cigarette products.

Electronic cigarettes were initially exempted from those targeted tax laws, and for obvious reasons. After all, they are not tobacco products. They have no tobacco in them, and there are no conclusive scientific studies that even suggest that they pose any serious threat to human health. They are nicotine delivery systems that do that job without the deadly risks associated with tobacco products.

Apparently, however, those facts are not sufficient to protect the industry or the consumers who patronize it from the ever-hungry arm of the government. Just last year alone, some 22 US states proposed some level of taxation on e-cigarettes. These taxes would typically come in the form of an excise tax, and would cover not only e-cigarette devices, but e-juice as well.

In North Carolina, the proposal included a tax that would be assessed on nicotine liquid in the amount of 3 cents for every milliliter sold. New Jersey is seeking approval for a sky-high tax rate that would amount to 75% of the total wholesale price of every purchase made. New York, ever the bastion of fiscal sanity, has matched its neighbor with an equivalent tax rate attempt. None of them compare, however, with the state of Oregon. There, the legislature is considering a tax that would amount to 81.25% of the total wholesale value of whatever amount any consumer spent on electronic cigarette materials.

Yes, you heard that right: 81.25% – or, to put it in dollars and cents, $8.12 for every $10.00 of the wholesale price of electronic cigarettes, e-juice, and related materials.

For anyone who cheers such a proposal, consider this. Imagine that your government wanted to tax you more than 80% for every portion of fast food that you ordered – you know, that fast food that we actually know can be harmful to your health. The fast food that can contribute to increased weight and all the health complications that obesity can cause. Who in our society would sit idly by as the government taxed fattening food at a rate that made it all but unaffordable for the average citizen?

Now, not every legislator in America has lost his or her mind over this issue, of course. There are still some jurisdictions where lawmakers are concerned that high taxes on e-cigarettes might discourage people from transitioning from tobacco products – the smoking products that we actually know harm people – to the safer electronic cigarette choices. Those lawmakers should be applauded. They actually understand the situation, and are actively looking at issues other than how government can line its budgetary pocketbook with the people’s money.

Minnesota and the state of North Carolina are at present the only two US state with e-cigarette taxes in effect, and between them we see just how different this system of taxation can be. In North Carolina, liquid nicotine is taxed at a rate of five cents for every milliliter purchased. At the more extreme end of the spectrum, lawmakers in Minnesota have taxed these products at 95% of the wholesale price one of the most onerous tax rates in American history.

The real problem with this tax grab can be better understood by looking at how it is being sold to the public. In the state of Washington, one Democrat lawmaker from Seattle actually asserted that the country is facing what was termed a “burgeoning public health crisis with e-cigarettes.”

News reports from the state may have revealed the real reasons for the tax, however, when details emerged that the tax revenue is expected to be used to close the existing gap in school funding. Oddly enough, lawmakers had also cited the addictive properties of nicotine as justification for their punitive tax schemes, but apparently missed the irony involved in having their own school system become dependent on revenues from addictive products.

The bottom line couldn’t be clearer. Despite almost no scientific evidence demonstrating substantive potential harm to public health, lawmakers are attempting to levy draconian, immoral taxes on products that actually help millions of Americans escape the harmful impact of tobacco. They can claim that they are doing this to help the public, but the facts seem to instead suggest that they just see an emerging industry that is generating profits that they can use to paper over their own profligate spending and budget mismanagement.